Buy Karur Vysya Bank; target of Rs 270: ICICI Securities

ICICI Securities research report on Karur Vysya Bank

Karur Vysya Bank (KVB) has seen remarkable transformation under the current management with steady growth and superior RoA. KVB sports one of the lowest cost of deposits alongside superior NIMs among peers. The bank has one of the lowest LDRs (83%) and one of the highest LCRs (185%); thus, should sustain ~15% CAGR in loan growth through FY24– 26E. All-inclusive SMA pool at <0.5% and amongst lowest net NPA (<0.4%) along with minimal exposure to unsecured retail nourishes our confidence on further moderation in credit costs. Overall, we expect KVB to sustain its leadership on RoA/RoE within the mid and small private banks space.

Outlook

Maintain BUY; target price revised to INR 270, valuing the stock at ~1.6x FY26E ABV. Enviable positioning on LDR, LCR, asset quality and RoA should lead to further re-rating.